US CMA Part 1 · Chapter 2 · Question 10 of 30
A company's maintenance cost has been estimated by regression as: Cost = $12,500 + $3.40 x machine hours. What is the forecast maintenance cost for a month in which 8,000 machine hours are expected?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $39,700
Explanation
Forecast cost = fixed component + variable rate x activity = $12,500 + $3.40 x 8,000 = $12,500 + $27,200 = $39,700.
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